Exploring and keeping readers up to date with the growing economic and political ties between China and South America. Including all the good stuff: Commodities, Energy, International Finance, South-South Cooperation, Microfinance and more

Friday, February 20, 2009

Since the inception of this site a major goal has been to inform and sometimes personally analyze China's growing commodity demand and increasing cooperation with emerging markets (particularly South America).

Flush with cash at a time when most countries and corporations are struggling to gain access capital, the Asian economic superpower has spent nearly $60-billion (U.S.) in less than a week in a series of deals that will secure a long-term supply of iron ore, copper, zinc and oil.

"Cash is king and China has lots of it," said Egizio Bianchini, global head of metals and mining at BMO Nesbitt Burns, which in the past, has represented state-owned Chinese firms in several mining deals.

"China is looking and saying 'We don't have a lot of competition here and we have ready cash.' [For almost everyone else] there is no public debt market and no public equity market," he said.

Desperate for financing amid stalled capital markets and investor abandonment of the sector, resource producers are turning to China for a commodity it has in spades: ready money.

Yesterday, Brazil signed a deal to supply China with 100,000 to 160,000 barrels of oil a day in exchange for billions of dollars of investment. Under the agreement signed in Brasilia, state-owned China Development Bank will provide financing to Brazil's state-run energy company Petrobras to develop its massive oil reserves.

Thursday, February 19, 2009

A interesting perspective on China's geopolitical interests in the Southern Hemisphere emerged from Accra, Ghana today.

The author, Bright B. Simons is an executive at IMANI-Ghana, a think-tank voted the sixth-most influential in Africa this year by Foreign Policy Magazine. I've copy and pasted a few experts below in order to summarize the major premise of the article and get you interested.

Remember the opinions and views expressed below do not reflect those of this site or myself (the author/ webmaster). None the less, they are legitimate views and overall, the analysis of the geopolitics at play is one of the best I've read in months and is definitely worth your time.

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In that scheme of things, one could have said that Hu's visit to Africa was part of the ongoing effort to diversify China's export markets away from their fatal dependence on Western profligates. China's trade with Africa has expanded 1,000% this decade to an astounding US$100 billion plus, a significant proportion of which is made up of Africa-bound Chinese consumables.

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Thus while Chinese Premier Wen Jiabao is being kept busy at home shoring up confidence in the southern export machine through staged visits to the shrinking enclaves of roaring capitalist success on the country's southern coast.

Vice President Xi Jinping has been neck-deep in diplomatic intrigue in Mexico, Venezuela, Brazil, Colombia and Jamaica.

Vice Premier Hui Liangyu has been asked to ride on China's recent membership into the Inter-American Development Bank (IABD) to worm his way into the hearts of Ecuadorian, Argentinean, Barbadian and Bahamian opinion leaders with assurances of more funds to follow on the $350 million that sealed China's membership in the IABD.

Chinese Vice President Xi Jinping makes a speech at a business seminar in Caracas, Venezuela,Feb. 17, 2009. Xi arrived in Caracas Tuesday for an official visit to Venezuela. (Xinhua/Ma Zhancheng)

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But look closely and another vortex pops out of the design: the visit to the four African countries is actually one plank in what seems to be a multi-prong diplomatic offensive aimed at consolidating some kind of Southern Hemisphere solidarityin anticipation of an era of mercantilist alliances arrayed to the effect of greater multilateralism and the breaking of Euro-American economic hegemony.

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Having painted this elegant portrait of the African visits as embedded inan overarching Chinese framework of geostrategic positioning, encompassing Africa, the Middle East and Latin America, gleeful observers are naturally inclined to dismiss the more mundane spin put on the issue by Chinese diplomats.

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Hu's choice of country visits, based on such logic, could thus only have been motivated by the desire to visit as many African countries as possible, and to engage in a powerful, if also political capital intensive, "geo-symbolism" that will manifest its usefulness should the growing outcry of a new world economic order lead to a greater multilateralism and its attendant universal international suffrage.

The credit crisis is hitting home in Venezuela in South America. Days after Chavez won his beloved struggle to be able to run for re-election plans have been announced by the government that Venezuela pans to boost oil output by at least 12%.

By 2013, Venezuela aims to increase its production capacity to 4.94 million barrels a day. This will require around $4.41 billion usd for drilling, $2.2 billion usd for steam injection to increase production and $6.51 billion for equipment to facilitate converting the region's tar-like oil into a low-sulfur crude oil for export.

Back in October 30, PDVSA opened the bidding for potential partners for ventures in the Orinoco oil belt. Which by the way Chavez never forgets to mention now puts Venezuela up there with Saudi Arabia and Canada in "proven petroleum deposits."

PDVSA is currently offering a 40% stake in a joint venture with the Venezuelan state oil company to develop new projects. According to Bloomberg the contracts can extend up to 40 years.

Russia... the titan of natural gas has profited handsomely over the years from exporting energy to Europe.

However, tensions between the West and Russia have relatively high since last summer when Georgia and Russia entered a state of war (see map), with each side still debating who started the hostilities.

Map of the Caucasus Region

Much of the tension over Russia's influence in the Caucasus (the region Georgia is located) stems from the fact that Georgia is home to the only pipeline that transports energy to Western Europe that is not “Made in Russia.

After the slew of political and regional disputes with Europe, Russia is turning east for new partners. The move makes logical sense. The economies of East-Asia, for example Japan and South Korea, are powerful consumer states that coincidentally have virtually no natural resources.

The natural gas plant, build on Sakhalin Island north of Japan greatly expands Russia's natural gas empire. Likewise, Asian resource starved countries like China, Japan and South Korea see this as an opportunity to invest cheaply in natural resources their economies will desperately need once the global economy recovers.

Monday, February 16, 2009

Apologies if my posting style today is a bit different than usual. Thought i'd give the major points some emphasis. The information below comes from a great site, Mish's Global Economic Trend and Analysis, which you can access by clicking on the hyperlink or going directly to

* Japanese exportsfell 35 percent in December from a year earlier. Industrial production plunged a record 9.6 percent, month on month, in December.

* Chinese exports declined for the third consecutive month in January, falling 17.5 percent from a year earlier, after a 2.8 percent decline in December. Imports plunged even further—43.1 percent, twice as much as December's 21.3 percent year-on-year drop.

* More than 20 million Chinese migrant workers have lost their jobs so far, with some analysts warning of 50 million more job lossesif the economy deteriorates further.

*India exports fell 24 percent in January. According to official data, one million Indian workers in the export sector have lost their jobs since September. Another half a million workers are expected to lose their jobs by March.

* New Delhi's (India) public debtstands at 75 percent of its GDP, compared to just 18.5 percent in China, leaving less room for large stimulus packages.

*South Korea's exports, the main driving force of the economy, plunged 32.8 percent in January. Finance minister Yoon Jeung-hyun warned on Tuesday that the fourth largest economy in Asia would shrink by about 2 percent this year. Credit Suisse has projected as much as a 7 percent contraction.

* Taiwan, the sixth largest Asian economy, saw its exports fall 44.1 percent in January from a year earlier—the biggest fall since records began in 1972. Imports plunged 56.5 percent in the same month. For an economy where exports account for 70 percent of GDP, the impact is devastating.